In major payment networks, payments traditionally begin when a payee (e.g., a merchant) is provided with payment card from a payer (e.g., customer) to satisfy payment for goods or services. In a typical payment transaction, a transaction device is read and an authorization request is sent to a payment network. The network routes an authorization request to the issuer (e.g., a bank) or payment network associated with the card. The issuer approves or declines the transaction and returns an authorization response to the payee via the network. If approved, the payee submits a settlement request to the network for payment. This payment process exists because the payee was typically the only entity that had connectivity to the payment network.
The existing payment process exposes a number of problems for the payer and the payee. Extensive infrastructure is often required to connect every merchant to the payment networks. Also, payment terminals usually require the card or card information to process the transaction. Moreover, mobile devices typically are not configured to communicate directly with terminals. Furthermore, the process is inconvenient and presents constraints to evolving business and transaction modules since payment can only be made to a merchant with a connection to the payment network. Finally, a fraud risk exists because card account details may be stolen and used in fraudulent transactions.
Thus, a long-felt need exists for a financial processing framework that utilizes modern transaction devices (e.g., mobile phones) and enables transaction processing via cloud computing.